Team A Week 5 Problems

Preview (5 of 16 Pages)

100%

Team A Week 5 Problems - Page 1 preview image

Loading page ...

Team A Week 5 ProblemsPE-2, page 862In January 2012, the administration of Sarah Company determined that it has enoughmoney to buy transient investments in debt and stock securities. In the course of the year,these are the transactions that happened.Feb. 1Purchased 1,200 shares of NJF common stock for $50,600 plus brokeragefees of $1,000.Mar. 1Purchased 500 shares of SEK common stock for $18,000 plus brokeragefees of $500.Apr. 1Purchased 70 $1,000, 8% CRT bonds for $70,000 plus $1,200 brokeragefees. Interest is payable semiannually on April 1 and October 1.July 1Received a cash dividend of $0.80 per share on the NJF common stock.Aug. 1Sold 200 shares of NJF common stock at $42 per share less brokeragefees of $350.Sept. 1Received $2 per share cash dividend on the SEK common stock.Oct. 1Received the semiannual interest on the CRT bonds.Oct. 1Sold the CRT bonds for $77,000 less $1,300 brokerage fees.The fair values of the NJK and SEK common stocks were at $39 and $30 in everycorresponding share at December 31.Instructions(a) Journalize the transactions and post to the accounts Debt Investments and StockInvestments. (Use the T account form.)(b) Prepare the adjusting entry at December 31, 2012, to report the investments at fairvalue. All securities are considered to be trading securities.(c) Show the balance sheet presentation of investment securities at December 31, 2012.(d) Identify the income statement accounts and give the statement classification of eachaccount.GENERALJOURNALDateAccount Titles and ExplanationDebitCreditFeb1Stock Investments51600Cash51600

Team A Week 5 Problems - Page 2 preview image

Loading page ...

Team A Week 5 Problems - Page 3 preview image

Loading page ...

(To record purchase of 1200 sharesof NJF common stock)Mar1Stock Investments18500Cash18500(To record purchase of 500 sharesof SEK common stock)Apr1Debt Investments71200Cash71200(To record purchase of 70 CRT Bonds)Jul1Cash (1200 x 0.80)960Dividend Revenue960(to record receipt of a cash dividend NJF)Aug1Cash8050Loss on Sale of Investments550Stock Investments8600(To record sale of 200 shares of NJFcommon stock)Sept1Cash (500 x 2.00)1000Dividend Revenue1000(to record receipt of a cash dividend)Oct1Cash2800Interest Revenue2800(To record receipt of interest on CRT bonds)Oct1Cash75700Debt investment71200Gain on sale of investments4500(To record sale of CRT bonds)Dec31Unrealized Loss-Income7500MarketAdjustment Trading7500(to record unrealized loss on trading securities

Team A Week 5 Problems - Page 4 preview image

Loading page ...

CASHStock InvestmentsDebt Investment96051600516008600712007120080501850018500100071200280075700Dividend RevenueLoss on Sale of InvestmentsInterest Revenue96055028001000Gain on Sale of InvestmentsUnrealized Loss - IncomeMarket Adjustment Trading450075007500Sarah CompanyBalance Sheet(partial)31-Dec-12CurrentAssetsShort-term investments, at fair value54000Other Revenue & Gains•Dividend Revenue•Interest Revenue•Gain on Sale of InvestmentsOther Expenses & Losses•Loss on Sale of Investments•Unrealized Loss

Team A Week 5 Problems - Page 5 preview image

Loading page ...

E7-5In the Reyes Company, checks are currently not prenumbered for the purchasing client andthe treasurer are both permitted to provide checks. Every benefactor has authorization towithheld checks stored in an open vault or cabinet. The purchasing agents pays all thecharges involving the merchandise bought for resale. Before the payment, the purchasingagent confirms that the merchandise have been acquired and validates the precisecalculation of the vendors’ receipt. After the transaction, the receipt is kept by the vendorand the purchasing agent lists the payment in the cash disbursements journal. Thetreasurer pays the remaining charges after the verification by the administrators. After thepayment, the treasurer seals all transactions with “paid”, sorts them according to paymentdate and lists the check in the cash disbursements journal. The Reyes Company retains onechecking account that is reconciled through the treasurer.Instructions(a)List the weaknesses in internal control over cash disbursements.1.No prenumbered checks.2.Checks are kept in unlocked cabinet3.No segregation of duties(b) Identify improvements for correcting these weaknesses.1. Order prenumbered checks.2. Lock disbursements and keep in separate area from others3. Segregate approvers, buyers, signers, treasury, account reconcilers.4. Filing improvements5. More than one signer needed for checks.

Preview Mode

This document has 16 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Accounting Principles II – Traditional Cost Systems

Accounting Principles II – Statement of Cash Flows

Accounting Principles II – Partnerships

Accounting Principles II – Managerial and Cost Accounting Concepts

Accounting Principles II – Long-Term Liabilities

Accounting Principles II – Investments

Accounting Principles II – Incremental Analysis

Accounting Principles II – Flexible Budgets and Standard Costs

Accounting Principles II – Financial Statement Analysis

Accounting Principles II – Current Liabilities

Company

Explore

Study Tools